Uncommon Wisdom

Jun 22 2010   7:09PM GMT

Smartphone war ahead: Android competitors to turn up heat on iPhone

Tom Nolle Tom Nolle Profile: Tom Nolle

Wall Street is looking at the fall as a critical time for Apple and the iPhone. What’s critical is that it may mark the beginning of a smartphone price war with highly functional models based on the Android operating system. Samsung’s Captivate will be available on AT&T, and it’s a specific push for a volume smartphone market. RIM is also expected to announce its new touchscreen BlackBerry.

All of this doesn’t spell the end of the iPhone, but it might spell the end of the margins that Apple has been able to command for its premier device. That would put Apple in the position of accepting lower margins (and likely a falling stock price) or trying to boost margins for the iPhone with new models/features.

The real news, though, will likely come from the face-off between a premium-priced iPhone and a discount-priced Android. How much do consumers value cachet? We may find out.

Apple’s iPhone 4 has done very well, but there are a lot of new competitors coming down the pipe — many available on AT&T alongside the iPhone and many available on Verizon, which still doesn’t support iPhones. Android 2.2 is going to be the OS on many of these new phones, and that’s a much better (some even say superior) phone OS.

The real issue for this particular race may be the value of Android as a broader-purpose OS. You can run PCs, tablets and a bunch of other things on Android. An Android ecosystem could benefit from the additional device breadth to create additional developer support. We don’t think iPhones are in trouble, but we do think that they’re going to be under new pressure this fall.

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